NEW YORK (AP) — The recent sell-off in the U.S. dollar has raised concerns about a potential loss of investor confidence in the U.S. economy under President Donald Trump. Currencies fluctuate regularly due to inflation fears, central bank actions, and other factors. However, economists are alarmed by the sharp decline in the dollar, which has fallen 9% against a basket of currencies since mid-January, marking its lowest level in three years. This decline is unusual as it coincides with tariffs that typically strengthen the dollar by reducing demand for foreign goods. Instead, the dollar has weakened, losing more than 5% against the euro and pound, and 6% against the yen since early April.
This drop could impact U.S. consumers through higher prices for imports and potentially higher interest rates on mortgages and car loans. The dollar’s dominance in global trade has been a strategic advantage for the U.S., allowing it to borrow at low rates and project power abroad. However, this “exorbitant privilege” is now at risk due to Trump’s trade policies and threats to the Federal Reserve’s independence. Some analysts compare the current situation to the Suez Crisis of 1956, which undermined trust in the British pound. While not everyone agrees that the dollar’s decline is due to lost faith in the U.S., the unpredictability of Trump’s policies raises questions about the future of the dollar’s reserve status.
— new from AP News
